Essay About Cis System And Rts Associates

Anacomp Financial Statement Analysis
Financial Statement AnalysisAssignment 1  “Anacomp”                11 February 2015Semester 2, Period 12014/2015Student Name (Student Number), Tutorial Group Number___________________________________________________________________________Anacomp, RTS associates, 4 banks, 20 review banks and officers and directors of Anacomp        – Anacomp had an agreement november 1979 with RTS Associates.Anacomp devolps the CIS system for RTS AssociatesRTS pays Anacomp a fee of $6 million of which $2.2 million was paid in 1980Anacomp agrees to market CIS for 5 yearsRTS had the right to extend the 5 years with an additional 5 years or cancel it if Anacomp did not market CIS goodRTS pays Anacomp: $1,44 million provided by partners, $3,25 million by bank loan, $2,2 million loan from Anacomp to RTSIf the devolpment expenses exceeded $6 million Anacomp agreed to give an extra $1,5 millionto RTS to complete the CIS systemOfficers and director of Anacomp own 38,5% of the shares in RTSAnacomp got a deal with four banks for $1,5 million each20 banks pay $150.000 non-refundable fee to be an advisory bankAnacomp buys CIS from RTS for $16 millionAnacomp will have the majority of the risk because they can loose the most money. 2,2 million + 1,5 million = 3,7 millionRTS stands to gain the most because they own the CIS systemShareholders are worse off, there’s $16 million paid for CIS and only $7,5 million costs of devolpment. Good returns for RTS but not for Anacomp shareholders                   3) If the project is succesful     Management has 38,5% of the stake in the partnership they may buy CIS without succes4)         – off balance sheet financing        – Devolpment costs offset against devolpment feeif completed in-house: Expenses are recorded but the reveneus won’t be recorded, the CIS system at that time allowed to be capitalized at cost and out house development at market value.Accelerated recognition of revenuesDeffered recognition of expenses        Enchances reported net income